Back to Blog

The Commodification of Payments Platforms

The Commodification of Payments Platforms

The following is a guest post by Sandeep Sood, CEO of Kunai.

Last year, Facebook announced that all Whatsapp users in India would be able to send payments using India’s Unified Payments Interface (UPI).

UPI was responsible for 2 billion payments in India during the last month alone. It makes it possible for Indians to pay each other seamlessly, regardless of the platform or bank account they are using. Add 400 million Whatsapp users to this system, and you have the most powerful payment solution anywhere in the world.

You also have the blueprint for the future of payments. In my view, that future is a delightfully simple one, in which universal payments solutions are an inevitability, with or without government standards like UPI;

The story in India is instructive. Before UPI, Softbank and Alibaba-backed Paytm had spent years and millions of dollars building and marketing proprietary digital wallets. UPI has made their solutions irrelevant overnight.

Today, proprietary wallets and payment platforms around the world are attempting to build moats through features and network effects. Yet, there is an obvious ceiling to what people want from their payment solutions…and the reality is that “pay anyone quickly” captures almost everything customers want.

When competing payment solutions reach feature parity, the only thing left are network effects. This means that each solution will have a choice: join a universal standard or fade into obscurity, like Paytm in India. The vast majority will choose to join a universal standard, which means they will become easy to replace.

This is a great outcome for economic growth and FinTech innovation. It is also fertile ground for the upcoming currency revolution. Universal payment solutions will also accept any form of currency with a large user base, be it the US Dollar, the Chinese Yuan, Bitcoin, or Central Bank Digital Currency (CDBC). The currencies of the future won’t compete based on their network effects, but rather more important attributes, such as their monetary policy. This is good news for currency innovations like Bitcoin.

As a FinTech newbie in 2013, I was surprised to find conferences, websites, and companies dedicated exclusively to ‘payments’. I was ignorant to the fact that payments were still generally clumsy and cumbersome…and that they required so much infrastructure and resources to do well. I’m looking forward to a future where the innovation is happening at a level far beyond the enabling of payments.

Sandeep Sood is the CEO of Kunai. He’s been building quality agencies that attract quality teams in order to build quality products. He sold his first agency, Monsoon, to Capital One in 2015.

Photo by emirkhan bal from Pexels